sebi:WTM/TCN/03/CFD/04/07

SEBI · SEBI · 2006-01-30 · T.C. Nair, Whole Time Member

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Facts / Headnote

Rejected

Provisions invoked

• s. 19
• s. 81

Regulations

• Reg. 4
• Reg. 4(2)
• Reg. 10
• Reg. 3(1)

Holding

The Whole Time Member rejected the request by M/s Shivshakti Agro India Limited, Shri Sumit Surekha and Shri Jyoti Surekha for exemption from Chapter III of the Takeover Regulations in respect of the proposed preferential allotment of 27,50,000 shares and purchase of 7.22 lakh shares of Cressanda Solutions Limited.

Full text

Home » Enforcement » Orders » Orders of Chairman/Members Enforcement Enforcement▼ ORDER IN THE MATTER OF PROPOSED ACQUISITION BY PREFERENTIAL ALLOTMENT AND PURCHASE OF EQUITY SHARES OF CRESSANDA SOLUTIONS LIMITED BY SHIVSHAKTI AGRO INDIA LIMITED, SHRI.SUMIT SUREKHA AND JYOTI SUREKHA–EXEMPTION APPLICATION FILED UNDER REGULATION 4(2) OF THE SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997. 1 .0 BACKGROUND 1.1 M/s Cressanda Solutions Limited (hereinafter referred to as ‘the target company’) is a company incorporated under the Companies Act, 1956, having its registered office at Khatau Building, AD Modi Marg, Mumbai-400023. The equity shares of the target company are listed on the The Bombay Stock Exchange Ltd. (BSE) 1.2 M/s Shivashakti Agro India Limited a company incorporated under the companies Act, 1956 and having its registered office at Arya Samaj Road, Samshtipur, Bihar-848101 Sumit Surekha son of Ram Gopal Surekha and Shri. Jyoti Surekha son of Ram Gopal Surekha (hereinafter referred to as ‘the acquirers’) are persons acting in concer acquirers do not hold any shares in the target company. 2.0 APPLICATION FOR EXEMPTION 2.1 The acquirers filed an application vide letter dated January 30, 2006 with the Securities and Exchange Board of India (hereinafter referred to as SEBI) under regulation 4(2) rea regulation 3(1) (l) of Securities and Exchange Board of India (Substantial   Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred

1 .0 BACKGROUND 1.1 M/s Cressanda Solutions Limited (hereinafter referred to as ‘the target company’) is a company incorporated under the Companies Act, 1956, having its registered office at 26/27 Khatau Building, AD Modi Marg, Mumbai-400023. The equity shares of the target company are listed on the The Bombay Stock Exchange Ltd. (BSE) 1.2 M/s Shivashakti Agro India Limited a company incorporated under the companies Act, 1956 and having its registered office at Arya Samaj Road, Samshtipur, Bihar-848101, Shri. Sumit Surekha son of Ram Gopal Surekha and Shri. Jyoti Surekha son of Ram Gopal Surekha (hereinafter referred to as ‘the acquirers’) are persons acting in concert. The acquirers do not hold any shares in the target company. 2.0 APPLICATION FOR EXEMPTION 2.1 The acquirers filed an application vide letter dated January 30, 2006 with the Securities and Exchange Board of India (hereinafter referred to as SEBI) under regulation 4(2) read with regulation 3(1) (l) of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as the ‘Takeover Regulations’). The acquirers proposed to acquire 34.7 lac shares out of which 27.5 lac shares were to be acquired by way of preferential allotment and 7.22 lac shares by way of purchase from Shri. Kalpesh Rashilal Shah, a public shareholder, (hereinafter referred to as the ‘seller’), at the rate of Rs.3.50 per share. Since, the post acquisition shareholding of the acqu

11(1),11(2) and 12 of the Takeover Regulations, inter alia, on the following grounds; a) The target company is in dire financial crisis; the cumulative loss of the company at the end of June 30, 2006 is Rs.6,12,32,000/- consequently eroding 68.03% of the networth of the company. b) The company requires direct capital investment in order to expand and diversify its business operations. c) Due to the current financial condition of the company and keeping in view its past performance, the target company is unable to raise any debt from the markets and its promoters are not in a position to invest further capital into the company. d) The preferential allotment would not in any manner affect or prejudice the interests of any public shareholders or other stakeholders of the company. e) If the acquirers are compelled to make the open offer under the takeover code, then the money paid out by the acquirers would go to the shareholders and not to the target company and consequently the target company will not be able to carry on with its diversification plans for lack of funds. f) Taking into account the pricing formulation of the Takeover code any open offer made by the acquirers would be made at a price less than par value of the share, ie Rs.10/-. Any shareholder accepting this offer would incur a significant loss. g) If the acquirers are not exempted from the applicability of the Takeover code, then the amount of actual investment would stand reduced. This will directly impact the

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